By Star Editorial Board, July 21, 2017
With the $6.7-billion acquisition of an American utility company Hydro One is growing. Ontario residents facing skyrocketing electricity bills should get some of the benefits.
The big winners in the $6.7 billion acquisition of an American utility company by Hydro One, formerly owned by the Ontario government, are the shareholders of the publicly traded company.
One stock market analyst says Hydro One shares, after falling about 4 percent so far in 2017, should see base growth of 5 percent annually. That, combined with the current dividend payout of about 4 percent annually, would amount to a return of almost 9 percent for investors. The annual dividend was increased in May to 88 cents a share. If acquisitions continue it could go even higher.
Here’s the rub: potentially healthy gains in the accounts of Hydro One shareholders would come as people across Ontario continue to express outrage every time they open their electricity bill.
But there’s one way to guarantee that Hydro One and other electricity ratepayers in Ontario will enjoy some of the benefits received by the company’s shareholders: the provincial government could commit to using hundreds of millions of dollars of dividend revenue earned annually from shares it has to hold onto to offset crippling electricity costs.
The average hydro bill in Ontario has increased almost 72 percent in just over a decade, with some rural property owners struggling to cover increases much larger than that. The average ratepayer in Toronto spends more than twice as much on hydro annually, compared to those in Montreal.
A 25-percent rate cut announced by the Wynne government is a band-aid solution, stretching out interest payments over 30 years to cover the cost of the subsidy, which will eventually burden taxpayers with an additional $25 billion.
Our government still owns 49 percent of Hydro One, even since its roughly $9-billion sell-off of what used to be a public utility. The province’s coffers received only about $4 billion of that after the remainder was used to pay down Hydro One’s debt – a pretty sweet deal for eventual shareholders on the backs of taxpayers. Legislation guarantees that the province holds at least 40 percent of the shares.
Calling the misguided Hydro One sale a transfer of a public utility over to private hands creates a misperception – any member of the public with about $22 (as of noon Thursday) can purchase a share of the company. But many Ontario ratepayers can’t afford to buy enough shares to really benefit from dividend payouts and share growth borne on the backs of ratepayers.
When former TD Bank CEO Ed Clark, who chaired an advisory committee that reported to Premier Kathleen Wynne, urged her government to unlock the value of provincial assets, including Hydro One, surely the benefits were supposed to be enjoyed by ratepayers, not just shareholders.
Our provincial government still controls about 290 million shares of the company. At the current dividend of 88 cents a share, that works out to $255 million a year (the dividend can be reduced or even eliminated). If used to offset the skyrocketing cost of electricity in Ontario, it would ease some of the feeling that hydro ratepayers got fleeced when the government sold a large part of the utility’s value to shareholders – in such transactions there are almost always winners and losers.
The government should commit to legislation that can’t be easily turned around, so hydro ratepayers can also directly benefit from the sell-off of what used to be a public utility, at a time when electricity costs in the province are so painful.
Our Comment
Big winners of privately owned corporate assets are supposed to be their shareholders! A corporation’s overriding duty is to rope in as much profit for its shareholders as possible.
“Asset recycling” by governments is a euphemism for privatization. Such an exchange trades commons for ready cash and transfers income from taxpayers to rentiers (a class of people whose income is derived from property rent or interest) – short term gain for long term pain!
It also serves to bail governments out of debt that was not necessary in the first place.
Legislation to spare ratepayers such ripoffs exists in the Bank of Canada Act. That Bank’s proper use would protect public utilities – precluding such shenanigans.
Élan
Reader Comment
As a retired 90-year-old third generation Canadian I protest the fact that Canada is financed by the foreign banking cartel. The Bank of Canada was established to finance the needs of all levels of Canadian government. And must be returned to its original mandate.
Don Harrison, Ladysmith BC
